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Dubai: The Organisation of Petroleum Exporting Countries (Opec) has held its nerve while oil prices have dropped nearly 20 per cent in a month and the producer group is expected to let the market slide further before taking any action to cut output.
Oil traded at below $120 a barrel on Friday, down from a July peak of $147.27 as soaring fuel prices and an ailing economy have cut consumption in the world's largest energy consumer the US. Opec members, source of more than a third of the world's oil, have shown scant concern.
"At the moment, and at this level, there is no movement within Opec to do anything," an Opec source said last week. "I don't think ministers will change output. I think at less than $80 for Opec oil, maybe they would do something."
Opec has been reluctant to disclose a target oil price, but even members of the group who have traditionally favoured higher prices have said they would be comfortable with a market below current levels.
Venezuelan President Hugo Chavez last week described oil's decline as "a good thing" and has repeatedly said $100 was a fair price for oil.
Opec President Chakib Khelil said prices were abnormal last week, when a barrel cost around $123. He said the price could fall to $70 to $80 a barrel in the long term.
"There's some realism and pragmatism in these comments," said PFC Energy's David Kirsch. "Exactly as they didn't think they could control the pace and magnitude on the upside, they don't think they can control the downside, so they may overshoot if they draw a line in the sand at say $100."
Bearish mode
Other analysts drew the line at slightly different levels. "They are not concerned," said Johannes Benigni, managing director of Vienna-based JBC Energy. "Maybe at below $105 they might do something. They won't want to see the price below $90."
Although the market has switched into bearish mode for now, few are expecting it to crash as oil exports remain vulnerable to supply disruption and demand from emerging economies led by China is expected to offset lower consumption in the West.
A Reuters survey of analysts has predicted US oil will average well above $100 for the rest of the year, with consumption expected to increase in the peak demand fourth quarter.
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